The NYT and WaPo have liberal bias, which is why conservatives need to read them

Matt Yglesias has a very disturbing post.  I’d guess that most intellectuals who read the post will yawn, which makes it even more disturbing:

The deep nature of the division is illustrated by the suspicious way in which legal opinions and policy preferences are lining up on this issue. Essentially everyone who believes the Affordable Care Act was an important step toward securing social justice also agrees that it would be absurd to construe the statute in a manner that’s plainly inconsistent with congress’ goals. And essentially everyone who believes it’s crucially important to give the crucial sentence the most straightforward possible reading rather than defer to the IRS’ efforts to make sense of the law as a whole, also believes that the law is a scandalous boondoggle.

This is just incredibly sad. I don’t fit into Yglesias’s generalization (making me inessential?), but even if I am 100% wrong about the Halbig case, I would not change a single word of this post.  It’s an embarrassment that the two sides of the debate line up so predictably on a narrow technical issue.  It says that intellectuals cannot be trusted to argue in good faith.

Then it gets worse:

The judicial branch is supposed to operate separately from the contours of partisan politics. But judges are human beings, subject to the same cognitive failings as everyone else — and the cognitive failings associated with polarized political disputes are large. And the judiciary is becoming more polarized along with everything else in America. David Paul Kuhn, for example, has shown that 5-4 decisions have become drastically more common over time.

The Supreme Court gets to choose which cases it hears, and this shows a Court that is increasingly inclined to hear cases that sharply divide the justices — and therefore the legal community — rather than to rule on questions where there is broad consensus. The justices also seem increasingly inclined to write maximalist rulings that can secure minimum winning coalitions, rather than to enter into compromises to secure broader agreement.

Another sign of polarization is in the selection of clerks. In recent years, Justices appointed by Democrats have come to almost exclusively select clerks who worked for Circuit Court judges appointed by Democrats and Republican justices behave the same way. Rather than seeking to surround themselves with intelligent young aides of varying views who will challenge their knee-jerk opinions, Justices seek assistants who share their outlook. Institutions like the Federalist Society and the American Constitution Society operate to ensure that politically-active lawyers operate in separate intellectual and professional networks from an early age.

So the Supreme Court is becoming increasing politicized, just like everyone else.  Is that bad?  Let’s just say it means we are becoming more like Venezuela.  I’ll leave it up to you to decide whether it is bad.

Then it gets even worse:

Vox’s Ezra Klein mounted an argument that it’s very unlikely the Supreme Court will affirm Halbig, citing the pragmatic reality that taking away health insurance from millions of people who already have it could be a political disaster. This makes a ton of sense to me. But as a forecast it would carry more credibility if we were seeing it on Fox News or The Wall Street Journal editorial page. Justice Scalia has gone so far as to say he doesn’t read the New York Times or the Washington Post because they’re too liberal, so it’s not obvious that ideas circulating in the non-conservative press tell us much about the thinking of conservative judges.

So it’s not just Paul Krugman who brags about reading only one side, the same is true of Scalia. What Scalia doesn’t understand is that the bias of the NYT (which is real) makes it even more essential that he read that paper.  Think about it.  If the NYT and WaPo have liberal bias, how likely is it that the WSJ and Fox News do not have conservative bias?  About one in a billion?

I find that when I read only one side of an issue like Halbig I get a biased perspective. Only after I read both sides do I have enough information to have an informed opinion.  I compare the facts presented, the logic of the arguments, etc.  You can usually tell who has the better argument.  In this case I thought the liberals did, but that’s immaterial.  I could easily be wrong. The point is to see both sides of the argument.

I once got into trouble for calling Krugman ignorant, by which I meant unaware of conservative viewpoints.  People thought I was calling him stupid.  Krugman and Scalia are obviously brilliant, but if they just read one side of the debate then there are not getting the maximum benefit from that brilliance.

Now go read a post by Brad DeLong or Mark Thoma to balance out my anti-Krugman bias!

Let’s consider the big picture

The Obama administration favors extending unemployment benefits from the normal 26 weeks to an “emergency” level of 73 weeks maximum.  You might wonder if that makes sense right now. After all, some bloggers are claiming that we no longer have a demand shortfall.  Ah, but you aren’t looking at the “big picture.”  Let Joe Biden explain why we need emergency level extended unemployment benefits right now:

Let’s step back and consider the big picture. When we took office, our country was in the throes of the worst recession since the Great Depression. Millions of people were losing their jobs, homes, and retirement savings. Many middle-class Americans who had worked hard all their lives feared they would never recover.

To reverse the spiral, we enacted the Recovery Act, made historic investments in clean energy and infrastructure, unlocked critical lending to small businesses, and cut taxes for average American families. We rescued the iconic American auto industry, which has created over 460,000 jobs since 2009. We cut our deficit by more than half as a share of the economy, the most rapid reduction since the end of World War II. We enacted Wall Street reforms to prevent another crash on Main Street and provided millions of Americans access to affordable and secure health insurance.

Thanks to your strong leadership, and because of the grit and determination of the American people, we are growing again, and our competitive edge is sharper than ever. Businesses are hiring at historic rates, with 52 consecutive months of net private sector job growth. Manufacturing is back, with 668,000 new jobs in the past 52 months. Exports have increased to record-breaking levels for four straight years, reaching $2.3 trillion in 2013. We have the world’s most skilled and productive workers, the strongest intellectual property laws, the most affordable and reliable energy supply, and the finest research institutions.

The world has taken notice. According to A.T. Kearney’s annual survey of global business leaders, in 2013 the United States overtook China, India, and Brazil to be the world’s single most attractive location for foreign investment, for the first time since 2001. In 2014, the United States was again named number one, this time by the widest margin ever recorded. In every sector, from heavy industry to advanced manufacturing to energy to information services, America is rated the best.

But as the United States becomes an ever-more attractive place to invest and expand operations, how will employers find the skilled workers they need to compete?

Yes indeed, how will they find those workers?

Wait a minute.  I apologize.  I provided the wrong quotation.  I was trying to link to the article explaining why we needed emergency extended unemployment benefits, and I actually linked to the article explaining why 6 years into his administration Obama’s jobs policies should be viewed as a smashing success.  My mistake.

PS.  Today’s announcement of 284,000 new unemployment claims is a shockingly low number. As a share of the population it is the lowest figure since the 1960s. The 4 week moving average (302,000) is roughly tied with April 2000 for the lowest figure in 45 years.  Next week’s figures could easily push the average below the April 2000 low.

So we have three data points:

1.  Employment/population ratio is horrible.

2.  Unemployment rate is mediocre.

3.  New claims figures are great.

I believe the unemployment rate (6.1%) is the most informative.  There is still some slack, but far less than in 2009.  Unemployment has been falling at a very steady 0.1% per month for a year and a half.  That will continue. Meanwhile, productivity numbers are horrible and likely to stay that way. As I’ve been saying, get used to 3% NGDP growth as the new normal, 1.2% real and 1.8% deflator. That means lower than normal interest rates as far as the eye can see.

 

Erdmann and Yellen will like this story

Janet Yellen has argued that the long term unemployed are not permanently out of the labor force, and that with faster growth in aggregate demand we can re-absorb many of those people.  Kevin Erdmann has done a number of thoughtful posts arguing that the extended unemployment benefits, which ended at the beginning of this year, raised the jobless rate somewhat.

This story caught my eye:

It’s been a rough year for the long-term jobless, with Congress refusing to renew an extension of federal unemployment benefits and some states slashing already-meager safety net programs, but a new study by a pair of Federal Reserve Board economists offers some hope for the future.

In a paper issued this week, Tomaz Cajner and David Ratner find that the percentage of the unemployed who have been jobless for more than 27 weeks – the definition of “long-term” unemployment – has been dropping sharply in recent months, and that there is strong evidence to suggest that it is because they are finding jobs rather than simply dropping out of the labor force altogether.

The news is good for the jobless, and it’s also good for Cajner and Ratner’s boss, Federal Reserve Board Chair Janet Yellen, who has staked out a public position claiming that as the economy continues to recover, the long-term jobless and even those who have left the workforce in discouragement, would begin to find work again.

Yellen’s position is in stark opposition to a competing theory backed by prominent Princeton University economist Alan Krueger and others, which holds that the long-term jobless are highly marginalized. In Krueger’s analysis, the long-term jobless have been so alienated from the workforce, for example, that even their presence in large numbers is not enough to drive down wages.

Further support for Yellen’s theory appeared yesterday in the National Association for Business Economics Business Conditions survey. NABE found that fewer companies are having trouble attracting skilled workers today than did this time last year – a counterintuitive finding, given that the economy has added 1.2 million jobs in the last 12 months and skilled workers were, presumably, among the most attractive candidates for hire. A possible explanation is that, as per Yellen’s prediction, discouraged workers are rejoining the labor force. 

In their paper, Cajner and Ratner point out that in terms of creating the large number of long-term jobless, the Great Recession was much worse than previous economic downturns. It peaked at 45 percent of the jobless, whereas in the 1982 recession, it topped out at 26 percent.

But the government did not offer 99-week unemployment benefits during previous recessions.

“In many ways the fight against unemployment during the recent recovery has been mainly one of bringing down the long-term unemployment rate,” they write. And finally, that’s starting to happen.

“Since December 2013,” according to Cajner and Ratner, “the long-term unemployment rate dropped 0.5 percentage point, thereby accounting for almost the entire decline in the aggregate unemployment rate.

Oddly, the media discusses Yellen’s explanation but not Erdmann’s.  Or maybe it isn’t odd, maybe it’s normal.

Off topic:  Back in 2009 we were told that there had been a housing “bubble.”  That there was all sorts of wasteful malinvestment.  We now know that there was much less malinvestment than people assumed, and I doubt bubbles even exist.

First cities like New York and San Francisco came back.  Then much of the East and West Coasts. Then Texas.  And now Miami is red hot.  Those empty condos were absorbed several years ago, and they can’t build new ones fast enough.  Imagine how strong the US housing market would be right now if the government hadn’t cracked down on immigration in 2006, and then drove NGDP down sharply in 2008-09

The conventional wisdom will eventually need an alternative explanation for the Great Recession. How about tight money?

On another issue, Harold Pollack tweets:

Halbig straightforward case of conservative judicial activism. It’ll be curious see whether any commentators who opposed ACA acknowledge it.

I do.  I opposed Obamacare, and also think that when the law is ambiguous the courts should go with clear Congressional intent.

BTW, Kevin Erdmann has an excellent 11 part series that explains why low interest rates lead to less leverage, not more.  It also touches on lots of other interesting topics.  Here’s one example from part 10:

This relates to another topic where I would reverse the standard narrative – international capital flows and wage levels.  It frustrates me to see economists universally referring to the movement of production to low wage economies, when the opposite is true.  Sometimes when the earth revolves around the sun, it looks like the sun is circling the earth.  And, here, we have uncontroversial data that capital flows overwhelmingly to high wage economies.  In cases where capital flows change noticeably, it is usually where institutional improvements in a developing economy lead to an expansion in the productive basket of goods they can supply, and so capital flows there to accommodate the new production.  Because wages are generally low at an absolute level, it appears that production is moving to exploit low wages, but this is absolutely wrong.  The trigger for expanded production is also a trigger for higher wages. Production doesn’t move to where wages are low – it moves to where wages are rising.  This subtle distinction is so fundamental and so important to a proper understanding of international economics, and yet so universally misstated.

I’m still working my way through the series.

Better homeless than in a lunatic asylum

A few weeks ago Paul Krugman suggested market monetarists were homeless.  By that he means we don’t have much support among GOP Congressman.  He doesn’t say why we’d want to have their support, after all, they don’t make monetary policy.

I pointed this out in a post a couple weeks ago, in reply to the Krugman post.  Now Krugman has posted again, repeating the claim that we are “homeless” because the House GOP doesn’t like us. Of course there is no sign he read my reply.  The only surprise is that lots of commenters think I need to reply again.  But why?  I already replied to his argument even before he wrote the latest post.

Still, I suppose one can always find something to comment on, so let’s consider this:

But there’s also a big difference in the intellectual roles of MM on the right and Keynes on the left.

Talk with Barack Obama, and you’ll find that he has a basically Keynesian view of the world. It may have wobbled a bit in the past, at times when he seemed to buy into the Confidence Fairy, but it’s still his basic outlook — and his aides are very much IS-LM macro types. True, they haven’t gone all out to push for fiscal expansion in the face of opposition (but remember the payroll tax cut), but that’s mainly a political judgement on their part. It’s not a fundamental difference in worldview from friendly economists.

Contrast this with Republican leaders, who get their macroeconomics from Hayek and Ayn Rand, and are clearly liquidationist; it’s not that they don’t take advice from MM, they’re actively hostile to its very concepts.

That’s what I mean when I say that MM is homeless, in a way that my tribe isn’t.

Most politicians are morons when it comes to economics.  That’s nothing to be ashamed of; I’m a complete moron about most non-economics fields in science and the humanities.  Would you care about my views on particle physics or French poetry? What I don’t see is why someone would be proud that certain politicians seem to like their economic theories.  I never get a chance to “talk with Barack Obama,” but I very much doubt he is a “Keynesian.”

1.  Obama thought the high unemployment of 2008 was due to ATM machines taking jobs from bank tellers.  Maybe he’s a Luddite.

2.  Obama thought a low interest rate policy was dangerous, because it could lead to asset bubbles.  Maybe he’s an Austrian.  Or maybe he listens to Larry Summers.

3.  Obama would often leave Fed seats empty for long periods, believing the Fed could do nothing when rates had fallen to zero.  When he finally did appoint people to the Fed, they were not people who agreed with Krugman on monetary policy.  At one point 6 of the 7 members of the board were Obama appointees, and not a single one agreed with Krugman on monetary policy.  Obama didn’t even bother making any appointments in 2009, when they would have been really helpful, and when he had a filibuster-proof majority in the Senate.  Maybe Obama only reads Krugman on the days where Krugman says monetary policy is ineffective at the zero bound, not the days when he says monetary stimulus is highly desirable at the zero bound.

4.  Obama thinks so little of monetary policy he is supposedly looking for someone with “community banking experience” for the Board.  I’m sure all the community banking experts out there are up to date on Woodford’s latest models of how to do policy at the zero bound.  Maybe Obama is a follower of Elizabeth Warren, the senator who said super inflation hawk Paul Volcker would be a great choice to head the Fed. (After all the Fed is all about regulation, not monetary policy, isn’t it?)

Oh, and that payroll tax cut that Krugman mentions, it was a GOP idea, Obama had to be convinced:

The White House is counting the 2 percent payroll tax cut among its “wins” in the tax deal worked out with congressional Republicans. But it’s a win based on a Republican idea and one that many congressional Republicans support.

You may recall that a payroll tax break or “holiday” was a Republican proposal back in 2009. Conservatives liked the idea then in lieu of a tax credit.

.  .  .

In 2009, the White House rebuffed the idea, preferring its grab bag of stimulus spending programs.

Of course the employee-side payroll tax cut did not speed up the recovery in 2011, nor did the repeal in 2013 slow it down, as Keynesians like Krugman predicted.  They should have done the employer-side payroll tax cut that Christy Romer suggested, which would have cut labor costs and boosted employment.

And followers of the IS-LM model?  Those would be the folks who thought money couldn’t have been tight in the early 1930s (or 2008), because interest rates were low.  Or the people who thought the US economy would slow down in 2013 due to savage austerity.  Or the people who thought monetary stimulus in Japan was pointless, they were at the zero bound.  Or the people who said the Swiss National Bank would not be able to stop the franc from appreciating.  Or the people who blamed the eurozone double dip recession on fiscal austerity, even though the US did slightly more austerity.  Or the people who said British fiscal policy really, really, really was quite contractionary, until growth picked up suddenly and they realized it could not have been contractionary.

PS.  And now Congress wants to pass a law requiring the Board of Governors to have at least one expert on community banking.  You can’t make this stuff up.

America the bully

Recently I’ve traveled to places like Switzerland and Britain.  One thing I noticed is that American policy is perceived quite differently overseas than in America.  At home, I don’t recall much discussion of “Fatca,” a regulation that forces foreign banks to provide the US Treasury with all sorts of data on American citizens.  This is also tied in with other somewhat unrelated issues; US spying on Germany, the Snowdon revelations, the $9 billion fine imposed on a French bank, etc. BTW, here’s a sensible essay that criticizes both sides of the French bank dispute:

There are no meaningful checks on this process, let alone a plausible procedure for BNP to appeal. Bank bosses cannot even publicly criticise deals they agree to under extreme duress. No precedent is set and no guidance provided as to the limits of the law and the proportionality of the punishment. So even if BNP fully deserves its punishment, the legal system that meted it out is closer to an extortion racket than justice. France’s economy minister, Arnaud Montebourg, has compared America’s pursuit of BNP to “economic warfare”. In other words, a bank that catered to mass murderers has had some success in portraying itself as a victim. Any process that can make BNP’s dealings with Sudan look anything less than shameful must be very flawed indeed.

BTW, London is really booming right now.  The locals believe this is partly due to its legal system, which is not corrupt (like most countries) or completely insane (like the US.) I’m no expert here, so I can’t comment on the merits of Fatca, but here’s what I do know:

1.  I can tell when outrage is real as opposed to mere self-interest at work.  There is real outrage overseas.  It may not be justified, but it is sincere.  It isn’t just anger about tax shelters being closed down.  There is a perception that the US is trying to make its laws apply everywhere in the world, not just in the US.  That the US is a bully in the financial world in the same sort of way that Russia is a bully in foreign policy

2.  There are complaints that the US forces foreign banks to divulge all sorts of information on US depositors, but refuses to reciprocate.  If Latin American governments ask for information on the Miami bank accounts of their residents (who may be evading taxes) the US government refuses to provide this information.  I don’t know if this double standard exists, but it is certainly perceived to exist.

3.  The US is the only major country that applies taxes on a citizenship basis, not a territorial basis.

4.  There has been a dramatic increase in the percentage of Americans living overseas who renounce US citizenship.  Some claim the paperwork requirements are too burdensome.  On the other hand the absolute number renouncing citizenship is still fairly small (4000/year out of a overseas population of 7 million), so I don’t know how worrisome this is.

5.  Some stories claim the cost of complying with Fatca regulations is actually far more than the expected $800 million in extra tax revenue.  Again, I don’t know if this is true.

6.  Nor is it clear that the law will impact its intended targets:

Meanwhile, the drug dealers and sophisticated tax evaders who inspired all this will switch into non-financial assets, such as art and property, or hide behind shell companies and trusts. The latter would be easier to penetrate if reliable ownership information were collected, but often it is not—and America is one of the worst laggards (see Delaware, Nevada and all the other money-laundering paradises within its borders).

7.  Boris Johnson, who might well be a future Prime Minister, was (possibly?) told that he is no longer welcome to be a customer of National Savings and Investment, a major British investment company.  His crime?  He is tainted by having been born in New York.  Even though he is British, and earns money being mayor of London, the fact that he is born in New York makes him a US citizen and hence a possible target of the US government.  That’s an extreme case, but it shows the lengths to which the Treasury is willing to go.

8.  There’s also a perception that the US government is trying to go after industries it doesn’t like, by pressuring banks to stop serving them:

The congressional report’s contention is that banks, worried about appearing to turn a blind eye to possible fraud, are simply ceasing to do business with all firms in industries that regulators have identified as suffering from frequent legal problems. These include seemingly legitimate businesses such as selling ammunition, coins, medicine, magazine subscriptions, fireworks and tobacco, the report points out. As it goes on to say, “Banks are put in an unenviable position: discontinue long-standing, profitable relationships with fully licensed and legal businesses, or face a potentially ruinous lawsuit by the Department of Justice.”

Banks have nothing to fear from the Obama administration as long as they obey “the law?”  Don’t make me laugh.

I’d be interested in what others think about this issue, especially commenters who have an overseas perspective.  Banks are very unpopular right now, and are an easy target.  But it also looks like lots of regular people are being hit in the crossfire.  Isn’t it always that way?